Douglas Dynamics, Inc.

Good morning and welcome to the Douglas Dynamics Second Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Nathan Elwell, Vice President of Investor Relations. Please go ahead.

Thank you, Drew. Welcome everyone and thank you for joining us on today's call. Before we begin, I would like to remind you that some of the comments that will be made during this conference call, including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause our actual results to be materially different. Those risks include, among others, matters that we have described in yesterday's press release and in our filings with the SEC. Please note we have published a one-page fact sheet on our IR website that summarizes our results for the quarter. Joining me on the call today is Mark Bangendran, President and CEO, and Sarah Lauber, Executive Vice President and CFO. Mark will provide an overview of our performance, followed by Sarah reviewing our financial results and guidance. After that, we'll open the call for questions. With that, I'll hand the call over to Mark. Please go ahead.

Thanks, Nathan, and welcome everyone. I'm pleased to say it was another good quarter for our company, with both segments executing well and a continuation of recent trends. Overall, our results were comparable to the same period last year. Solutions delivered another record quarter, the fifth in a row, and with an impressive profit increase. Preseason demand and shipments at Attachments were generally in line with our expectations. When combined, this has allowed us to narrow and increase our guidance ranges for the year. Sarah will speak to that later. Our business is running at a high level of efficiency and effectiveness right now, and it's great to see the strong engagement of our teams. Let me run through our performance in each segment, starting with Work Truck Attachments. Snowfall last year was about 10 percent below the longer-term average, but up compared to the previous two winters. Ice events were well above average. This weather, coupled with dealer inventories moving in the right direction, positioned as well as we proactively addressed the elongated equipment replacement cycle. More specifically, the ratio of preseason shipments in 2025 is expected to be closer to the more traditional 55 percent to 45 percent split between the second and third quarters. Last year, in 2024, we shipped 65 percent of preseason in Q2 and 35 percent in Q3. This was unique, as higher finished goods inventory at the end of Q1 last year drove a stronger shipment mix in Q2. As we've noted, company-owned attachment inventories this year have decreased significantly compared to last year. We are also seeing dealer inventories coming back in line with expectations after a couple of years of being elevated, which, assuming we receive a normal amount of cooperation from Mother Nature, bodes well for us this winter. We will be paying careful attention to reorder activity in the back half of the year and weather trends in the fourth quarter. Finally, I'm pleased to say that dealer sentiment and financial health both remain positive. Clearly, the segment has adapted and adjusted to the unique weather patterns of the past several years. This is what we are good at. Production plans are logical, inventories are in good shape, and we are playing off of our front foot operationally. To summarize, we are well positioned to respond to Mother Nature this coming winter. Turning to work truck solutions, the teams exceeded expectations and in doing so delivered their fifth consecutive record performance. This is even more impressive now that the comps are tougher compared to a record quarter last year. We remain encouraged by the progress that's been made in recent years and the strength of our backlog, which is being driven by robust municipal demand. Our municipal business continues to grow thanks to our investments and optimization efforts in recent years, plus our strong competitive position in the dynamic market. In our commercial business, we are seeing softer order patterns at the local dealer level due to overall economic and competitive pressures. Dealers have a fair amount of inventory on the ground, and when you add higher interest rates compared to the last several years and cautious consumer sentiment in general, smaller customers are more price-conscious and hesitant. The commercial fleet business, however, remains generally positive and seems less impacted by these near-term issues. Finally, the backlog in solutions is still very strong. The mix between commercial and municipal backlog shifts over time, and municipal customers make up the lion's share right now. We are booking production dates well into 2026 and are adding approximately 10 percent of additional municipal capacity, which we expect will come online next year. So overall, continued strong performance in the solution segment. Before we go any further, let me take a moment to reiterate our position on tariffs and their potential impact on our performance. First and foremost, we are a U.S.-focused company. Our operations, supply base, and sales are all primarily domestic. We have increased our annual guidance, and that includes a logical assessment of the impact of tariffs this year. As we look further out, we will continue following the evolving situation and analyze to what extent the proposed tariffs would impact our business. Our global sourcing team is a real advantage in times like this, and we are well-versed in moving quickly to adapt to changes. We know we're in good hands with that team and stand ready to manage through additional tariffs and trade rule changes. Okay. I'd like to take a step back and touch on the three priorities we've been formalizing internally, and we've really been focusing much of our time on this year, namely optimize, expand, and activate. We have three great businesses that are already operating efficiently, but we know there is always more that can be done. So our first priority is to optimize our current operations. Now, of course, this isn't a new concept at Douglas Dynamics. It's part of our DNA, but it makes sense to step back and, with the newly formed leadership team, ensure that we are fully focusing our efforts across the organization. One of the best examples of our optimized initiative is our long-term project to create centers of excellence within the attachment segments. In the past, our three facilities in Milwaukee, Madison Heights, Michigan, and Rockland, Maine operated as they had historically, generally centered around our three brands. Over the past several years, our manufacturing team has initiated the monumental project of moving specific product production to individual facilities, thereby creating centers of excellence that focus on specific aspects of our manufacturing. A good example of this is our Madison Heights, Michigan facility that manufactures all of our hoppers and spreaders, regardless of brand. We can focus all of our engineering, supply chain, and manufacturing expertise across all three brands in that one facility. So optimize is the first pillar. The second is expand, pursuing organic geographic growth opportunities and product offerings to exceed customer expectations. Earlier, I mentioned a great example of geographic expansion and solutions. Lead times across the municipal segment are getting longer, and we believe our ability to deliver trucks on time is an important differentiator. This is one of the reasons we recently broke ground on a new multi-purpose facility leased in Columbia, Missouri, to better serve the surrounding markets with new up-fits and to service existing in-market municipal trucks. At Attachments, our engineering team is world-class. We consistently strive to develop the next generation upgrades of our existing products, and we also work to broaden our product offering. Recently, we launched a new piece of tech, an auto-speed controller for hopper spreaders at the annual Snow and Ice Management Association Conference, and it's being well-resourced within the industry. This controller is located in the vehicle cab and easily links directly to the truck's CPU. This allows it to automatically adjust the flow of de-icing material as the vehicle speed changes, improving efficiency, reducing wasted de-icing material, allowing for better monitoring, and giving the contractor one less thing to think about as they work. What's more, this technology is retroactively compatible with Douglas Dynamic truck hoppers across our Western, Fisher, and Snow X brands going back almost 10 years. We are also exploring new areas of snow and ice control in collaboration with partners. We can't talk about that at the moment, but we plan to have more to say in 2026. And finally, activate, which refers to the restart of our M&A efforts, as we look for the opportunities to build our portfolio of attachments and diversify our overall offering over the long term. And imagine last quarter, with the recent improvements in our performance and balance sheet, and a clear vision of the types of acquisitions we are best suited to make operationally, we can now consider small to medium-sized deals if and when we find the right opportunity. Ideally, these opportunities would be in the work vehicle attachment space, have strong brands and growth potential, as well as being a good cultural fit. We have started to conduct more research and investigate companies while still maintaining our disciplined approach. There will be more to come on our strategic pillars in the coming quarters. To conclude, this was another quarter characterized by strong execution, ongoing dedication, and market-leading innovation. I would categorize our general outlook as remaining positive, but with caution, looking around the corners as to what might be coming our way. Inside our company, we firmly believe we have the right people in place and operations that are correctly aligned with the current market conditions. In work truck attachments, we are operating efficiently and we are correctly sized to work through the elongated replacement cycle, ready to use our ability to handle whatever weather conditions we see later this year. In work truck solutions, while seeing softness in our commercial dealer business, continues to see a positive fleet business and substantial demand and backlog in our municipal business. And the alignment of our future strategy around the optimize, expand, and activate areas of focus reinforces our confidence that we can achieve our longer-term growth and profitability goals in the years ahead. Thank you to everyone at Douglas Dynamics for your commitment and drive to exceed. I fully believe that the future presents many exciting opportunities for us to grow and achieve our considerable potential. With that, I'd like to pass the call to Sarah.